February 9, 2000
Geneve Corporation
96 Cummings Point Road
Stamford, CT 06902
Attention: Steven B. Lapin, President
David T. Kettig, Esq.
Gentlemen:
Reference is made to the Preferred Stock Purchase Agreement (the
"Agreement") entered into as of October 22, 1997, between The Aristotle
Corporation (the "Company") and Geneve Corporation (the "Purchaser") pursuant to
which, among other things, the Purchaser acquired shares of Series E Convertible
Preferred Stock of the Company (the "Geneve Preferred Stock"). Unless otherwise
indicated, all capitalized terms used in this letter shall have the same meaning
as set forth in the Agreement or the Certificate of Designation, as defined
below.
The Company has advised the Purchaser that, rather than wait until the
mandatory redemption date of December 31, 2007, as provided in the Series E
Convertible Preferred Stock Certificate of Designation (the "Certificate of
Designation"), it would be beneficial to the Company for various reasons,
including, but not limited to, augmentation of the Company's balance sheet and
assistance with respect to the Company's tax planning efforts, if the Purchaser
would accelerate the conversion (the "Conversion") of all of the Geneve
Preferred Stock.
Accordingly, in order to induce the Purchaser to accelerate the
Conversion, the Company and the Purchaser hereby agree as follows:
1. Conversion Effectuated. Effective immediately, the Purchaser hereby
elects to convert (a) $330,000 stated value of the Geneve Preferred
Stock into a Promissory Note to be issued by the Company in the
principal amount of $330,000 (in the form attached hereto as Exhibit
A), and (b) $1,920,000 stated value of the Geneve Preferred Stock
into 489,131 shares of the Company's Common Stock. To the extent
that the terms of the Certificate of Designation and the terms of
this letter differ, the
terms of this letter shall prevail;
2. Certificate of Designation Terminated. The Certificate of
Designation shall be deemed null and void, there being no more
shares of Series E Preferred Stock outstanding;
3. The Agreement. The Agreement shall remain in full force and effect
provided, however, (A) Section 5.05 of the Agreement (i) shall
terminate with respect to any limitation on the Purchaser's voting
rights and privileges, effective immediately, except that it shall
not terminate with respect to voting rights and privileges
pertaining to the election of directors of the Company and the
approval, ratification or confirmation of the appointment of the
independent accountants for the Company (collectively,
"Director/Auditor Voting Rights"), and (ii) shall terminate with
respect to Director/Auditor Voting Rights (a) as of January 1, 2002,
and (b) at any time prior to January 1, 2002, if two designated
representatives of the Purchaser (currently, Edward Netter and
Steven B. Lapin) are not members of the Board of Directors of the
Company, and (B) Section 5.06 of the Agreement shall terminate,
effective immediately;
4. Issuances of Stock. The Company shall not issue shares of stock
(other than Excluded Shares) such that the issued and outstanding
shares of the Company owned by the Purchaser represents less than
30% of the outstanding value of the stock of the Company at any
testing date; provided, however, in the event that the Company
issues any Excluded Shares which would cause the Purchaser to have
less than 30% of the outstanding value of the stock of the Company
at any testing date, the Purchaser shall have the right to purchase,
as of the testing date, such number of shares of the Company's
Common Stock from the Company at the then Fair Market Value thereof
so that such Purchaser does not have less than 30% of the
outstanding value of the stock of the Company at such testing date,
provided, further, however, that the Purchaser has determined, in
its sole discretion, that it is unable to purchase in the open
market such shares of Common Stock at the Fair Market Value thereof
as of the testing date (all of the foregoing within the meaning of
Section 382 of the Internal Revenue Code of 1986 and the regulations
pertaining thereto). Further, the Company shall not issue shares of
stock or rights, warrants or options entitling the holders thereof
to subscribe for or purchase shares of stock such as to cause an
ownership change (within the meaning of Section 382 of the Internal
Revenue Code of 1986 and the regulations pertaining thereto).
The Company is aware that the Purchaser is currently the record holder of
shares of Preferred Stock of the Company other than shares of Series E
Convertible Preferred Stock (the "Strouse Group Preferred Stock"), which the
Purchaser purchased from the previous record holders of Strouse Group Preferred
Stock, and that the Purchaser has, contemporaneously herewith, provided notice
to the Company, in the form attached hereto as Exhibit B, of its election to
convert all of the shares of the Strouse Group Preferred Stock of which it is a
record holder (namely, 56,809 shares) into 94,682 shares of the Company's Common
Stock.
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The Company has advised the members of its Board of Directors that the
Purchaser, in its capacity, immediately after the Conversion, as the largest
holder of shares of Common Stock of the Company, desires to further assure the
continuation of John J. Crawford as the Chairman, President and Chief Executive
Officer of the Company.
If the foregoing is in conformity with your understanding and agreed to,
please sign below where indicated.
Very truly yours,
THE ARISTOTLE CORPORATION
By: ____________________________________
John J. Crawford
Its: Chairman, President and
Chief Executive Officer
The foregoing is in conformity with our understanding and agreed to as of this
9th day of February, 2000.
GENEVE CORPORATION
(Record Holder of the Geneve
Preferred Stock)
By: ____________________________________
Steven B. Lapin
Its: President
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EXHIBIT A
PROMISSORY NOTE
$330,000 February 9, 2000
New Haven, Connecticut
FOR VALUE RECEIVED, The Aristotle Corporation (the "Borrower") hereby
promises to pay to the order of Geneve Corporation (the "Lender"), a Delaware
corporation, in lawful money of the United States of America at the office of
the Lender at 96 Cummings Point Road, Stamford, Connecticut, 06902, or at such
other place or places or to such other party or parties as the Lender may from
time to time designate, the principal sum of
Three Hundred Thirty Thousand DOLLARS ($330,000)
as follows:
Principal. The Borrower shall pay the entire principal balance of this
Note on December 31, 2001;
Interest. Interest shall accrue on the outstanding principal balance of
this Note at the rate of eight percent (8%) per annum, and shall be paid
quarterly in arrears commencing March 31, 2000.
It is the intent of the Lender and of the Borrower that in no event shall
interest be payable at a rate in excess of the maximum rate permitted by
applicable law (the "Maximum Legal Rate"). Solely to the extent necessary to
prevent interest under this Note from exceeding the Maximum Legal Rate, any
amount that would be treated as excessive under a final judicial interpretation
of applicable law shall be deemed to have been a mistake and automatically
cancelled and, if received by the Lender, shall be applied to the principal
balance of this Note or, if no principal balance remains outstanding, then such
amount shall be refunded to the Borrower.
The Borrower may voluntarily prepay this Note in whole or in part at any
time and from time to time without penalty, together with interest accrued on
the amount prepaid through the date of prepayment.
Upon the occurrence of any one or more of the following events (each, an
"Event of Default"), the Lender at its option may declare all amounts due
hereunder, including, without limitation, the entire unpaid principal balance of
this Note and any accrued, unpaid interest thereon, to be immediately due and
payable without notice or protest (both of which are hereby waived):
(a) The failure to make any payment of principal or interest due pursuant
to the terms of this Note on or before the due date;
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(b) (i) The commencement by the Borrower of a voluntary case under 11
U.S.C. '101 et. seq. (the "Bankruptcy Code") or any foreign, federal or
state bankruptcy, insolvency or other similar law now or hereafter in
effect, or (ii) the consent by the Borrower to the entry of an order for
relief in an involuntary bankruptcy or similar case, or to the conversion
of an involuntary case to a voluntary case, under any such law, or (iii)
the consent by the Borrower to the appointment of, or the taking of
possession by, a receiver, trustee or other custodian for all or a
substantial part of its properties, or (iv) the making by the Borrower of
any assignment for the benefit of creditors, or (v) the admission by the
Borrower in writing of its inability to pay its debts as such debts become
due, or (vi) the discontinuance of business, dissolution, winding up,
liquidation or cessation of existence by the Borrower; or
(c) (i) The entry by a court of a decree or order for relief with respect
to the Borrower in an involuntary case under the Bankruptcy Code or any
applicable foreign, federal or state bankruptcy, insolvency or other
similar law now or hereafter in effect, which decree or order is not
stayed or dismissed within 60 days of the entry thereof, or (ii) the entry
by a court of a decree or order for the appointment of a receiver,
liquidator, sequestrator, trustee, custodian or other person having
similar powers over the Borrower or over all or a substantial part of its
properties.
Upon the occurrence and continuance of any Event of Default hereunder, (i)
the Lender may declare the principal balance of this Note to be immediately due
and payable, provided, however, in the case of an Event of Default described in
paragraphs (b) or (c) above, all amounts payable by the Borrower hereunder,
including, without limitation, the principal balance and all accrued interest on
this Note, shall automatically become immediately due and payable, without
notice, action or election by the Lender, and (iii) the Lender may enforce any
other rights granted pursuant to this Note, any other document, or by applicable
law. All of the rights of the Lender hereunder shall be cumulative and not
exclusive, and each of which may be exercised singly, repetitively, in any
combination, and in any order. The Lender's rights and remedies hereunder may be
exercised without resort or regard to any other source of satisfaction of any
liabilities owing by the Borrower to the Lender. No inconsistency between the
default provisions of this Note and any other agreement shall be deemed to
create any additional notice, cure or grace period or derogate from the express
terms of such provisions.
Upon the occurrence of an Event of Default, the Borrower agrees to pay on
demand all out-of-pocket costs and expenses (including, without limitation,
reasonable attorneys' fees) incurred or paid by the holder(s) hereof in
collecting or enforcing this Note.
The Borrower hereby waives presentment, demand, protest or notice of any
kind in connection with this Note. No failure on the part of the Lender in
exercising any right or remedy hereunder, and no single, partial or delayed
exercise by the Lender of any right or remedy shall preclude the full and timely
exercise by the Lender at any time of any right or remedy of the Lender
hereunder without notice. No course of dealing or other conduct, no oral
agreement or representation made by the Lender or usage of trade shall operate
as a waiver of any right or remedy of the Lender. This Note contains the entire
agreement between the parties with respect
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to the subject matter hereof, and supersedes every course of dealing, other
conduct, oral agreement or representation previously made by the Lender. In the
event that any court of competent jurisdiction shall determine that any
provision, or portion thereof, contained in this Note shall be unenforceable in
any respect, then such provision shall be deemed limited to the extent that such
court deems it enforceable, and the remaining provisions of this Note shall
nevertheless remain in full force and effect.
None of the terms or provisions of this Note may be excluded, modified, or
amended except by a written instrument duly executed on behalf of both the
Borrower and the Lender expressly referring hereto and setting forth the
provision so excluded, modified or amended. No waiver or forbearance of any of
the rights and remedies of the Lender hereunder shall be effective unless made
specifically in a writing signed by the Lender, and any such waiver or
forbearance shall be effective only in the specific instance and for the
specific purpose for which given.
This Note shall be binding upon the Borrower and shall be enforceable
against the Borrower and its successors, and shall inure to the benefit of the
Lender and its successors, endorsees and assigns. The Borrower may not assign
this Note or any rights hereunder without the express written consent of the
Lender.
THIS NOTE IS DELIVERED TO THE LENDER AT ITS PRINCIPAL OFFICE IN STAMFORD,
CONNECTICUT, SHALL BE GOVERNED BY, CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF CONNECTICUT WITHOUT REGARD TO ITS PRINCIPLES OF CONFLICTS
OF LAWS, AND SHALL TAKE EFFECT AS A SEALED INSTRUMENT. THE BORROWER AND EACH
ENDORSER AND GUARANTOR OF THIS NOTE SUBMIT TO THE JURISDICTION OF THE COURTS OF
THE STATE OF CONNECTICUT AND OF THE UNITED STATES DISTRICT COURTS SITUATED
THEREIN FOR ALL PURPOSES WITH RESPECT TO THIS NOTE.
THE BORROWER HEREBY EXPRESSLY, KNOWINGLY AND VOLUNTARILY WAIVES ALL RIGHTS
TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING ARISING OUT OF, IN CONNECTION WITH,
OR RELATED TO THIS NOTE, INCLUDING, WITHOUT LIMITATION, IN CONNECTION WITH ANY
DEFENSE, AFFIRMATIVE DEFENSE, COUNTERCLAIM OR THE LIKE ASSERTED AGAINST THE
LENDER.
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IN WITNESS WHEREOF, the Borrower has caused this Note to be executed as an
instrument under seal as of the date first above written.
THE ARISTOTLE CORPORATION
BY: ___________________________________
John J. Crawford
Its:Chairman, President and Chief
Executive Officer
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EXHIBIT B
NOTICE OF ELECTION TO CONVERT
SHARES OF PREFERRED STOCK OF
THE ARISTOTLE CORPORATION
FEBRUARY 9, 2000
TO: The Aristotle Corporation
27 Elm Street
New Haven, CT 06511
Attention: Paul M. McDonald, Secretary
PLEASE TAKE NOTICE that Geneve Corporation, the record holder of 23,608
shares of Series F Preferred Stock of The Aristotle Corporation (the
"Corporation"), 4,053 shares of Series G Preferred Stock of the Corporation and
29,148 shares of Series H Preferred Stock of the Corporation, or an aggregate of
56,809 shares of Preferred Stock (collectively, the "Strouse Preferred Shares"),
does hereby elect, irrevocably, to convert the Strouse Preferred Shares into an
aggregate of 94,682 shares of Common Stock of the Corporation (representing
39,347 shares of Common Stock upon conversion of the 23,608 shares of Series F
Preferred Stock; 6,755 shares of Common Stock upon conversion of 4,053 shares of
Series G Preferred Stock; and 48,580 upon conversion of 29,148 shares of Series
H Preferred Stock), effective immediately.
This notice is being delivered to the Secretary of the Corporation, but is
effective as and when written.
Dated as of the ninth day of February, 2000.
GENEVE CORPORATION
By:_____________________________________
Steven B. Lapin
Its: President
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